An effective world-wide solution for taxing businesses in the digitalised economy aimed at preventing further unilateral action and ensuring sustainable growth, investment, tax certainty and fairness, was called for by international tax experts and civil society representatives at a hearing held by the EESC on 29 January.
High-level speakers agreed that only a world-wide solution could be effective, both in terms of regulation and governance, and they welcomed the on-going debates taking place as part of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
Participants discussed possible approaches to taxing businesses in the digitalised economy, currently being debated as part of this framework, including new systems for allocating international taxing rights (such as user participation, marketing intangibles and significant economic presence), and the ability of countries to exercise taxing rights in instances of BEPS.
It was proposed that the possibility of addressing the tax issue within the Value Added Tax system should be fully explored and that a common definition for the concept of value creation was needed. In addition, it was decided that there was also a need to examine further whether an income tax solution focused on tax allocation of revenues would be preferable to a consumption tax solution.
Speakers urged that certain fundamental principles such as avoidance of double taxation, simplicity, certainty and equality be adhered to when designing new rules. A simplified methodology will be critical for the various parties involved and fair and efficient dispute resolution mechanisms must be developed and implemented. They also recommended further economic analysis of the impact of the BEPS project and the potential impact of any future measures that might be implemented.